Redmond shelling out $200 million for loss-making Israeli company.

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Microsoft is believed to be buying Israeli firm N-Trig, the company behind the pressure-sensitive stylus included with the Surface Pro 3, for as much as $200 million, according to a report from Calcalist.

N-Trig has faced numerous financial difficulties over the last few years after the 2011 decision to focus on digital pens. Globes reports that the company had failed to meet financial conditions attached to a loan and that it was suffering heavy losses, leaving it with less than $5 million cash on hand. At its peak, the company was valued at $200 million to $300 million with plans to float on the Tel Aviv Stock Exchange. Those plans were cancelled last year.

Microsoft already held a 6.1 percent stake in N-Trig and was responsible for 79 percent of the company's revenue. While the first two generations of Surface Pro used Wacom styluses, Microsoft switched to N-Trig hardware with the Surface Pro 3.

It's believed that most of N-Trig's 170 employees will become part of a new Israeli research and development operation.

The acquisition is striking, as it implies that Microsoft is in the PC hardware business for the long haul. N-Trig is an important supplier for the Surface Pro 3, and rather than switching to a different supplier (reverting to Wacom, say), Microsoft has chosen to buy out the company, thereby safeguarding its technology.